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BANJUP RESIDENTS GROUP (Inc.)

Banjup Must Be Heard !!

2015 - 3.5% rise really 7.5%                                             Cockburn Council Acknowledges Error in Rates Calculations

17 September 2015

The persistence of the Banjup Residents Group has paid off!

After much lobbying and deputations by the BRG to Council, the City of Cockburn discovered that it had made an error in the calculation of residential rates for 2015/16. The average rise was not 3.5% but 6.4%, as calculated by auditors Deloittes, a leading international accounting firm.

Three-quarters of all residential rates bills were increased by more than 3.5%:

 

Cockburn’s CEO admitted that the council staff had made an error in setting the rates and proposed that money should be refunded to ratepayers to bring the average down to about 3.8%. At their September meeting, Councillors agreed and a letter of apology and refunds of $50 to $1000 would be posted to 14,761 ratepayers.

Banjup Residents had been pressing Cockburn on the rates problem since 11 June. We were dismissed or ignored on 22 occasions. Our persistence has paid off and we are pleased that the problem has now been fixed.

At their September 2015 meeting, the Mayor and councillors thanked the BRG for their continual efforts in bringing the rates problem to the City’s attention. Councillors then clapped their hands to applaud the Banjup Residents Group.

The BRG representatives thanked the Council for their kind sentiments.

Subsequently, the Council of the City of Cockburn sent a letter acknowledging the positive contribution made by the BRG in resolving the rates problem. The text of the letter is below.

 

17 September 2015

Vice President

Banjup Residents Group (lnc.)

BANJUP WA 6149

 

Dear Ian,

APPLICATION OF RATES CONCESSION FOR 2015/16 FINANCIAL YEAR

At the Council Meeting conducted on 10 September 2015, the abovementioned matter was the subject of deliberation by Council.

Subsequently, Council resolved to grant a concession on the rates assessments of 14,761 affected residential improved properties across the district, due to a miscalculation of the rates adopted by Council during the 2015/16 Budget setting process. A briefing outlining the details of the concession calculation was provided to representatives of your organisation prior to the Council meeting.

While this outcome was the result of a comprehensive review of the administrative mechanism used to determine the rates across the City of Cockburn. it was first alerted to the City thanks to the diligence of your membership.

Accordingly, Council wishes to acknowledge the positive contribution made by your organisation during the review and appreciates the level of understanding you have of the complex issues involved in this matter. Your persistence in representing the ratepayers of your location has demonstrated the importance of community participation in the local governance of the district.

Thank you for your ongoing involvement with the City of Cockburn on matters of specific interest to your local area and Council looks forward to building on the positive relationship that has developed between our organisations.

Yours sincerely,

 

DON GREEN

DIRECTOR, GOVERNANCE & COMMUNITY SERVICES

Inequitable Rates Increases 2015/16

13 July  2015

Cockburn’s Assertions Misleading and Lack Transparency

Cockburn Council adopted this motion on 11 June 2015:

“The proposed rate in the dollar is 7.074¢ of GRV value. The increase is 3.5% for the average property after allowing for the waste management service charge and the community surveillance levy to be added into general rates.”

The Banjup Residents Group maintains that this statement is misleading and that the real rates increase for most Cockburn residents is much higher, particularly in Banjup.

Banjup residents met on 21 June to discuss the rates rises and to hear the Committee’s views on how the rises will affect Banjup. The presentation materials used are published on this website and are summarised below.

Cockburn’s Finance Director attended the residents’ meeting. He said that the Committee’s calculations were wrong but declined to say why or to explain why his assertion of the average 3.5% rise was correct. He could have brought his calculations with him to present why he was correct but he did not do so.

 The Committee believes that the average rates rise for the 84% of Cockburn ratepayers who are non-pensioners will be about $110 or 8%. Within that, the 30% of properties that are minimum rated will get a rise of 5.7% and the other 70% of properties will get a rise of 8.7%.

The Committee recognises that the 16% of pensioner ratepayers will get an average reduction in their rate bill of about $190 or 20%. However, this shifting of the burden from one group of ratepayers to another was never mentioned in public documents or at Cockburn Council meetings. The ethics of this large shift are questionable and should have been publicly debated.

The Committee is deeply concerned by the lack of openness and transparency about how the rates rises have been calculated, how they will affect different bands of ratepayers, and how ratepayers can be expected to comment meaningfully without sufficient data. Was adequate modelling done in the first place? If so, then who saw it and who decided not to reveal it? It would seem that councillors have made rating decisions on the basis of inadequate information.

 

On this page the Committee sets out its understanding of the effects of the rate rises on ratepayers.

 

How Rates Are Calculated

The rates are calculated for each residential property in Cockburn by multiplying the “Gross Rental Value” (GRV) by the “rate in the dollar”.

The GRV is set by the state’s Valuer General and is based on his assessment as to what a property might be rented for over a year. For example, a property that might rent for $400 a week would have a GRV of $20,800; a rent of $500 a week would have a GRV of $26,000.

The rate in the dollar is set by the City of Cockburn every year. For a rate of 7 cents in the dollar, the rates charged for a property with a GRV of $20,800 would be $1,456 and for a $26,000 GRV property the rates would be $1,820.

Cockburn also sets every year a minimum rate payable; for 2015/16 it is $1,250. Properties with a GRV below $17,670 will all pay $1,250 in rates.

Every 3 years the Valuer General reviews all GRVs in Cockburn and this often leads to a significant change in the rate in the dollar.

 

Cockburn’s Rate 2015/16 Changes

The 2014/15 general rate was ~4 cents in dollar of Gross Rental Value. The 2015/16 rate is ~7 cents in dollar of GRV but includes provision for rubbish collection and CoSafe, which will no longer be charged separately.

Cockburn says that this rolling up means bigger a rebate for pensioners. 6,000 pensioners in Cockburn claim the 50% rebate. Pensioners comprise 16% of the 37,099 residential properties.

The rebate is deducted from registered pensioners’ rate bills but claimed back from the state government by Cockburn.

 

 

Rates Up by 7.9%, Not 3.5%

By straightforward arithmetic, it can be shown that rate bills will rise by an average of 7.9% in 2015/16. Cockburn’s claim that the rise will be 3.5% is yet to be substantiated.

In 2014/15, there were 36,313 residential properties in Cockburn. In 2015/16, there are 37,099. Applying the 2014 rates in the dollar to the 2015 number of properties, Cockburn would have raised $32.8 million. To be comparable to the 2015 rolled up rates, $16.1 million and $2.4 million would need to be added for rubbish and CoSafe respectively, making a total of $51.4 million that would have been raised at last year’s rates.

From Cockburn’s own data, the amount raised from residential rates in 2015/15 will be $55.4 million. This is an increase of 7.9% overall.  It remains to be seen how this can be reconciled with Cockburn’s 3.5% average.

You can download the spreadsheet that performs these straightforward calculations here.

 

Higher GRVs Hit By Punitive Rises

Adding rubbish collection and CoSafe to the general rate magnifies the effects of rate rises because there is a much bigger value to multiply than the previous basic general rate.

For example, in 2014/15 a $22,000 GRV property would have been charged $947 in general rates ($22,000 x 0.04303 rate in the dollar). To this would have been added the rubbish and CoSafe charges of $500, giving a total of $1,447.

In 2015/16 the same property will be charged $1,556 ($22,000 x 0.07074 rate in the dollar), a 7.6% increase – double the claimed 3.5% “average”.

Banjup properties are hit hard by the rate rises because almost all have GRVs between $23,000 and $35,000. This graph shows how steeply the changes rise by GRV across Cockburn:

 

The bigger the GRV, the bigger the increase. Some illustrative rises are:

 

 

Distribution of Cockburn Properties by GRV

The City of Cockburn has not published any data on how many properties there are by GRV. However, it is essential for modelling the effects of the rises that a reasonable estimate is made of how many Cockburn properties there are with, say, a GRV of $20,000 to $22,000, with a GRV of $22,000 to $24,000 and so on.

Assuming a normal distribution – a ‘bell curve’ – of the properties in Cockburn, the numbers of properties by GRV group could look somewhat like this:

 

 

How Rate Rises Affect Non-Pensioners

There are 6,000 pensioners in the City of Cockburn. Assuming that they are evenly spread across all GRV band, then reducing the number of properties in each band by 16% gives the number of properties occupied by non-pensioners. The rate increases for the 31,099 non-pensioners (84% of all ratepayers) look like this by GRV:

 The only GRV for which a 3.5% increase will apply is $19,750. All those above that value will get progressively steeper rises. Minimum rated properties will get a rise of 5.66%.

At this year’s number of non-pensioner properties at the 2014/15 rate in the dollar, the average rate bill for a non-pensioner in Cockburn would be $1,384, including rubbish and CoSafe. At the 2015/16 rate in the dollar, bill for the same non-pensioner will be $1,494, an increase of $109 or 7.9%, comprising a 8.7% ($128) increase for a non-minimum rated property and 5.7% ($67) for a minimum rated property. Higher GRV properties get progressively higher increases.

 

How Rate Rises Affect Pensioners

The 6,000 pensioners get a 50% rebate on their rate bills. Their rate increases look like this by GRV:

 

On this analysis almost all pensioners will see a rate decrease in 2015/16 – some by 25%.

At this year’s number of pensioner properties at the 2014/15 rate in the dollar, the average rate bill for a non-pensioner in Cockburn would be $942, including rubbish and CoSafe. At the 2015/16 rate in the dollar, bill for the same pensioner will be $747, a decrease of $195 or 20.7%.

 

Equity

The Cockburn Finance Director maintains that reducing pensioners’ rate bills by up to 25% is “giving them a break”, some might question the equity by which it is achieved.

An average non-pensioner in Cockburn will pay $109 more so that an average pensioner can pay $195 less.

For an average $25,000 GRV property in Banjup, the non-pensioner will pay an extra $193, a 12% increase, whereas the pensioner would pay $154 less, a decrease of 15%.

This cannot be dismissed, as the Cockburn Finance Director has done, as 31,099 paying “a few dollars more” so that pensioners can get a break.

It seems like taxation to redistribute income, which is not within the scope of the Local Government Act.

 

The Finance Director’s comment at the BRG meeting that “State and federal governments have attacked pensioners and seniors quite methodically” has political overtones that prejudice the independence of Cockburn’s Administration.

 Using the residential rates system for social engineering or for base political reasons should have been debated fully and publicly by Cockburn Council. The impacts of the significant changes proposed should have been clearly set out. Ratepayers deserve to be much better informed.

 

Lies, damned lies, and statistics

We see from this that the Finance Director has used loose language to blur the real rate rise that he has pushed through Council. The BRG Committee demonstrated at the 21 June general meeting that last year’s rates and rubbish bills pulled in $50.4 million from residential ratepayers. In 2015/16, Cockburn will pull in $55.4 million, a 10% rise.

None of the foregoing was made clear to Cockburn councillors at their 11 June meeting when they approved the rates. And none of it was clarified at the BRG general meeting when the Finance Director addressed our members, although he must have known all of the issues described above.

It all goes to prove the old adage: Lies, damned lies, and statistics.

 

Questions That Will Be Asked

When the rate notices are issued in August, Cockburn will get queries like this:

My immediate neighbour in Atwell is a pensioner. We both have houses with GRVs of $24,000. My rates bill has gone up by $165, an 11% increase, whereas my pensioner neighbour’s bill has gone down by $167. Why must I pay my neighbour $165? This is unfair.

My next door neighbour in Success lives in a 3 bedroom house with his wife and 2 children. His GRV is $20,000. I live in a 4 bedroom house with my wife and 2 children. My GRV is $22,000. My neighbour’s rates bill has increased by 4% but mine has increased by 7.6%. I thought that Cockburn was increasing its rates by only 3.5%. If my sums are correct, it seems that if both of us had a general rate rise of 4% on last year and then added in the rubbish service, then he is paying $450 for his bins and I am paying $500. This is unfair. Why do I have to pay more for the same service?

 

How Could This Have Been Avoided?

Cockburn provided no information in its public documents as to how the rate rises would affect a spectrum of ratepayers. This must have been deliberate policy to avoid public comment on the rate in the dollar advertised in its Objects & Reasons report. Like Banjup residents, most readers would have assumed the increase is 3.5% for the average property, which is misleading, to say the least.

Cockburn’s lack of transparency is deplorable because it thumbs its nose at the people it is there to serve.  

Alternatively, did the information exist in the first place? The graphs shown on this page are straightforward to produce, especially with the full data base to hand. If Cockburn’s version of the graphs do exist, then they should be published. If they do not, then what modelling of the rates changes was undertaken? Serious questions must be asked of the Cockburn’s officers.

Councillors need to get to the bottom of this debacle. Only they have the power to get questions answered. Ultimately, they have the power to demand changes in the Administration so that ratepayers are better and more equitably served in the future